But instead of Mr Carroll, a former member of the elite Navy SEAL Team Six, being disciplined, Mr Richter was the one sent home. U.S. Embassy officials in Baghdad told him he had to end his investigation and leave Iraq because he was disrupting the security options Blackwater was providing for diplomatic staff, the New York Times reports.

ust over two weeks later, Blackwater contractors opened fire in Baghdad's Nisour Square, allegedly killing 17 civilians and wounding 20 others. The incident caused massive outrage among the Iraqi public and is believed to be one reason Iraqi leaders refused to agree to allow U.S. troops to stay in the country past 2011.

Mr Richter claims: 'Mr. Carroll’s statement was made in a low, even tone of voice, his head was slightly lowered; his eyes were fixed on mine. I took Mr. Carroll’s threat seriously. We were in a combat zone where things can happen quite unexpectedly, especially when issues involve potentially negative impacts on a lucrative security contract.'

Mr Carroll has not commented publicly on the allegations. Despite his abbreviated visit to Iraq, Mr Richter's report paints a damning picture of Blackwater, which was paid more than $1billion to guard American diplomats.

He comments in his report that 'Blackwater contractors saw themselves as "above the law" and actually believed that they "ran the place."'

Mr Ritcher details a pattern of drunken partying by Blackwater contractors, including with female visitors.

In one incident, he describes four guards drunkenly commandeered a $180,000 armored vehicle to drive to a party and then crashed it into a blast barrier.

Contractors kept their weapons in their personal quarters, despite rules against it, and carried all manner of automatic weapons, machine guns and rocket launchers - even when the contractors were not certified to use them, according to the report.

Blackwater guards were also alleged to frequently run Iraqi civilian cars off the road and fire into neighborhoods, sometimes even killing civilians, Mr Richter alleges.

Mr Richter's review also found the company's security operations lacking. The contractor often reduced or otherwise changed the number of men assigned to a protective detail without getting permission from the State Department.

They also over-billed the State Department and falsified records, Richter alleges.

A Blackwater-affiliated contractor also allegedly mistreated migrants it hired to work in its security compound, offering them low wages and squalid conditions for housing - including packing three men in a tiny room with no bed.

The company was also accused of badly mismanaging a cafeteria on its compound, providing unsanitary and substandard food. Conditions were so bad, a U.S. military officer wrote a letter to the State Department saying it should be shut down.

Blackwater was sold in 2010 and the new owners changed its name to Academi. A spokeswoman for Academi, based in Virginia, declined to comment.

Iraqi officials had demanded to try to Blackwater guards alleged to have committed the 2007 Nisour Square massacre in Iraqi courts. However, in 2008, the U.S. government indicted 14 security contractors on charges related to the shooting.

In 2009, a federal judge threw out all charges.  However, an appeals court allowed the charges to go forward. The case is still pending.

Neither Young nor his attorney could immediately be reached for comment. Young is listed as Inactive Ready Reserve, according to Virginia Keys, a spokeswoman for the Internal Revenue Service Criminal Investigation Division, which was among the agencies investigating the case. Keys said Young was a Special Forces lieutenant colonel while on active duty.

Young pleaded guilty in December to disclosure of procurement information and money laundering in connection with a military contract for services in Afghanistan. U.S. District Court Judge Tena Campbell, in Salt Lake City, sentenced Young to 42 months in prison, followed by 36 months on supervised release.

Between March and June of 2007, Young was deployed to Afghanistan with the Combined Joint Special Operations Task Force as an official liaison for Afghan National Security Force Partnering.

During his deployment, while he was involved in the transfer of greater responsibility for Afghanistan’s national security to the Afghans, a decision was made to solicit a pilot contract to train Afghan forces in weapons maintenance and property book management.

Young admitted to federal prosecutors that he had confidential bid, proposal and source selection information concerning the pilot contract and that he disclosed information to two officials of American International Security Corp., which eventually won the contract.

Another defendant in the case, Christopher Harris, who worked as the country manager in Afghanistan for AISC, received more than $17 million during the life of the contract. Harris, 49, of Lake Havasu, Arizona, pleaded guilty to conspiracy to commit government procurement fraud and money laundering and is scheduled to be sentenced June 23, according to an announcement of Young’s sentencing by the U.S. Attorney’s Office in Utah, which prosecuted the case.

“Conduct like we see in this case undermines the confidence of American taxpayers who continue to pay for the cost of our efforts in Afghanistan,” said David B. Barlow, U.S. attorney for the Utah District, in an announcement of the sentencing.

“Young held a position of trust with the United States Army and violated his ethical duties as a soldier. He knew full well that he could not ethically use or disclose the protected information as he did,” Barlow said.

Other investigators in the case were the Army Criminal Investigation Command’s major procurement fraud unit, Defense Criminal Investigative Service and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.